India urged to promote interest-free banking system

JEDDAH: A senior leader of the ruling Congress Party of India has emphasized the need to introduce an interest-free Islamic banking and financial system in the country in order to improve the economic condition of its poor through microfinance and mobilize funds required for the country’s infrastructure projects.

“If we are able to make Islamic finance available it would bring great benefits for our country and people,” said M. M. Hassan, who is also a former state minister of overseas Indians’ affairs.

“The Kerala government intends to make use of Islamic finance for infrastructure and industrial development in the state,” he said.

Hassan said his party, under the leadership of Chief Minister Oomen Chandy, would work for promoting Islamic finance in the state and press on the central government and Reserve Bank to get approval for the purpose. The previous LDF government in the state had taken the initiative to establish an Islamic finance company, with state-owned Kerala State Industrial Development Corp. (KSIDC) contributing 28 percent of the capital.

Hassan also spoke about his Janasree Sustainable Development Mission, a non-banking financial institution, to fund small and medium enterprises (SMEs) of its members.

“We are thinking of making use of Islamic finance for this venture. The availability of interest-free loans would be a big blessing for common people,” he added.

Janasree Microfinance has won approval from the Reserve Bank to operate as non-banking finance firm with a capital of 50 million rupees mobilized from 200,000 shareholders. It will provide microfinance services to small-scale projects including agriculture and industries. “I think our company can operate in accordance with Islamic banking principles,” he added.

The Jeddah Chapter of the Indian Forum for Interest Free Banking (IFIB) recently submitted a memorandum to State Minister for Overseas Indians’ Affairs K. C. Joseph in the presence of Hassan, conveying the feelings of 2 million Indian expatriates working in Saudi Arabia to take a better decision on investment of their hard-earned money in financial institutions of their choice.

The memorandum was presented by V.K. Abdul Aziz, director of Al-Hayat International School, and O. P. K. Kutty, regional financial controller of AA Turki Group, both are members of IFIB. They also presented a copy of the memorandum to Hassan.

The memorandum, addressing Indian Finance Minister Pranab Mukherjee, Reserve Bank of India Governor Subba Rao, Minister for Overseas Indians’ Affairs Vayalar Ravi, and the general manager, State Bank of India, Jeddah Branch, requested that a notification may be published in the Official Gazette of India to include interest-free banking as a form of business and advise the Reserve Bank to issue necessary instructions to all banks to introduce interest-free banking or open interest-free banking windows.

Speaking to Arab News, Kutty said: “Being a pluralistic society India should welcome the interest-free finance system as it would benefit the country’s poor a lot.”

He called for changing Reserve Bank regulations to make Islamic finance available on a wide scale.

“The Islamic financial system can operate as a parallel system in the country,” Kutty said, adding that it would help attract funds from NRIs working in the Gulf.

He urged Indian authorities to take quick steps to make use of these huge funds.

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